When retirement is distant, it can be tempting to skimp on planning in favor of more current financial issues.
However, retirement is typically one of the most significant financial undertakings. It involves many aspects, such as saving enough to live your desired lifestyle, estate planning, ensuring your loved ones are covered, and more. So, it’s wise to start planning for retirement as soon as possible. With that in mind, this article will dive into a few critical ways to begin your retirement planning early.
Ways to plan for retirement
Here are three key steps to plan for retirement:
- Get a life insurance policy
According to LIMRA, 68% of households with life insurance would feel financially secure if the primary wage earner were to pass away unexpectedly. Only 47% without life insurance say the same. So, getting a life insurance policy is a critical step in planning for peace of mind in retirement. If you pass away during the policy term, your loved ones receive a death benefit to help replace your income and pay off debts. You can also consider getting a life insurance retirement plan (LIRP), which is a permanent life insurance policy that builds up cash value over time to provide financial security after you retire.
Life insurance also serves as a way to pass more of your wealth down to your heirs when you pass away because the death benefit is tax-free. That way, they get the full death benefit payout without owing taxes on it.
- Contribute to a retirement account
Retirement accounts provide tax advantages that make it easier to save more money for retirement. As a result, your retirement assets can potentially grow faster. For example, full-time employees may have access to an employer-sponsored retirement account, such as a 401(k). Contributions are pre-tax, meaning they aren’t factored into your taxable income. These also often offer matching bonuses — free money for retirement from your employer. Try to contribute at least up to the matching bonus limit.
Once you hit that matching bonus, consider an Individual Retirement Account, or IRA. There are two types:
● Traditional IRA: Contributions are pretax, but retirement withdrawals are taxed at your ordinary rate.
● Roth IRA: Contributions aren’t tax-deductible, but qualified retirement withdrawals are tax-free.
- Create an estate plan
Estate plans detail all your end-of-life wishes, such as asset distribution, financial and medical decision-making, and more. Without this, your family may have to go through time-consuming, costly court battles.
There are several key elements of an estate plan. One of the most important is the will, which lays out your wishes for asset distribution to your heirs. Powers of attorney are also vital for ensuring others can make decisions for you if you’re incapacitated. The durable power of attorney assigns someone to handle financial decisions on your behalf if you become incapacitated. For example, a person with a durable power of attorney could pay bills, get loans, and access your financial accounts. Meanwhile, a medical power of attorney assigns someone to make medical decisions on your behalf if you become incapacitated.
Another key piece of your medical documents is the advanced health care directive, which states your wishes for end-of-life medical decisions. And an often-overlooked piece of estate planning is the funeral. You should also get this in writing for your wishes to be met. Creating a funeral planning checklist can help you knock each step out as efficiently as possible. Here are some steps to planning a funeral:
● Compile vital statistics
● Decide who will be involved in the funeral service
● Write down your preferences for the viewing and service
● Determine your desired disposition method and memorialization
● Arrange for payment
Make sure to review this information periodically and keep your loved ones up to date on these matters.
Prepare for retirement as soon as possible
It’s smart to start planning for retirement as early as possible. This will maximize the chance that you reach all your retirement goals and give you more room to adjust if needed. Start by shopping for a life insurance policy to ensure your loved ones have the financial protection they need after you pass away.
Meanwhile, start contributing to retirement accounts as much as you can comfortably afford. Then, put together an estate plan, even if retirement is far away. Once you have it in place, adjusting it later is much easier. These are just a few steps that can help you plan for retirement. But doing them now will give you more peace of mind and help you achieve your retirement goals.
While this is the norm, the earlier you can start thinking about making a retirement plan, the better off you will be when the time comes to hang up your hat.
Seniors are living longer and longer every year and this can mean that your traditional savings plan may need to be amended. Instead of saving to have a steady income for a decade or so, you now may need to find a way to pay your expenses for a quarter-century or more. With the right advice from a financial planner, they can help you make decisions about your savings, retirement rollover, and your potential retirement income. Let’s take a closer look at a few reasons why retirement planning is crucial for your future.
1. Rising Life Expectancy
In 1990, the average life expectancy was only 75. If you retired at 65, you only had to find a way to pay your expenses for a decade or a bit more. For most workers, that was a manageable amount. In today’s world of sophisticated technology and medical advances, the average lifespan tops out at 82 and is expected to rise. Retirees can now enjoy up to 20 to 30 years of their golden years after they stop working. Being able to live comfortably for a quarter of a century with only your retirement savings may seem like a challenge. Making a retirement savings plan now will help you to grow your investment and have the money you need after you retire.
2. Less Stress
One of the most common causes of stress-related illnesses is money troubles. When you are constantly worrying about how you will take care of yourself, your spouse, and your home when you retire, you can experience high levels of stress. When you work with a financial advisor to come up with a logical retirement plan, you can relax in the knowledge that your needs will be met in the future. You will be able to kick back and enjoy your golden years if you start your retirement planning now.
3. Financial Obstacles
If the devastating COVID-19 pandemic has taught us anything, there are never any guarantees when it comes to the economy. If you don’t have a solid retirement plan now, there is no way to be sure that you won’t face financial obstacles in the future that could affect your savings. When you construct a reliable retirement plan, you can be assured that you will have the funds you need for retirement regardless of the economic state.
4. Independence
No one wants to feel like they are a burden. Many seniors are concerned that they will end up relying on their children and other family members without the right retirement plan when they stop working. When you make a solid retirement plan, you will be able to maintain your independence and enjoy your time with your family without having to feel like a burden.
Conclusion
Retirement planning should be a priority for everyone that is currently working. The earlier you can start saving for your golden years, the more time you will have to enjoy the time you have spent a lifetime working towards.
Tell us about your career path and what brought you to the world of finance?
I started in the Insurance, Retirement & Financial Service industry at age 20 after getting laid off from my previous employer by answering an ad for a captive company. Coincidently, it ended up being complete luck because I was studying Business Management and Marketing at college at the time and had never even looked into a career in finance prior to this. I ended up loving my new career choice and after only three years, I had worked my way up to Regional Manager. Once I learned I could go independent and offer my clients better and more versatile products, coupled with a lower rate and/or a better return on their retirement, it was time for a move. So, in 2005 at age 23, I started Postema Insurance & Investments, LLC.
Within a short period of time, I saw myself training a wonderful group of agents and growing at a rapid pace. We currently have offices located in Ohio, Indiana, and Florida and continue to train weekly to be the best representatives we can for pre-retirees, as well as retirees. As we assist our clients by providing in-house comprehensive financial education, we understand service is key so they may have a thorough understanding of their individual financial situations.
What was your main motivation behind setting up Postema Insurance & Investments and your other businesses under the Postema umbrella?
The main motivation was to help pre-retirees and retirees by “Protecting Everything You’ve Worked For”. We wanted to make a considerable impact in our industry through the process of education and training including topics like IRAs, 401k’s, life insurance, income planning, medicare options, and supplemental insurance (including The Affordable Care Act).
Five years after we opened, we then started a Property & Casualty division to assist clients with car, home, rental and business insurance. My goal was to establish a one-stop-shop for all of my clients’ financial and insurance needs. This is how the other Postema companies formed, advancing us one step further towards meeting that goal.
Postema Capital Lending: During the pandemic, we noticed from our clients there was a vast need for commercial real estate, equipment loans, business lines of credit, home mortgages and home equity loans. Thus, we launched Postema Capital Lending.
Postema Accounting Solutions: Postema Accounting Solutions is the accounting and tax division of the Postema businesses. In an effort to provide a one-stop location for clients’ insurance and financial needs, having in-house accounting and income tax experts was a logical addition.
The tax consequences of adding money (as well as withdrawing money) from investment products should always be examined prior to making a decision. Clients have the ability to check with our tax and financial/retirement experts so they can reach an educated decision when choosing the best course of action for their particular financial situation.
There are also numerous advantages to having everything in one location when income tax time arrives. Our clients have the opportunity to have someone already familiar with their financial situation prepare their income tax return for a very reasonable rate, rather than dealing with a different individual each year. Under these circumstances, vital pieces of information are less likely to be missed.
Postema Accounting Solutions provides our clients access to tax and accounting experts to ask questions pertaining to their specific situations year-round, not just during income tax season further solidifying the benefits of this division.
Postema Marketing Group: I started Postema Marketing Group in 2009 along with Joe Santore, who in my opinion is one of the greatest marketers and trainers in helping agents with retirement and income planning for their clients. Together with Joe and the rest of the team, we have trained thousands of agents and agencies across the country on how to ethically consult in areas of finance, retirement, taxes and insurance. I consider it an honour to be a part of an industry that is often shunned.
Many advisers skim through the products, but you need to educate yourself on what you need vs. what you want.
What are the financial actions you advise people to take in the current uncertain environment?
Start to look at conservative or guaranteed options available out there and make sure you understand the difference between the two. Many advisers skim through the products, but you need to educate yourself on what you need vs. what you want. Do not be afraid to ask the hard questions. If anyone has questions, please do not hesitate to shoot me an email about your interests or concerns and I can send you a free book. Also, remember to see what stage you are in as far as the grand scheme of things. Are you in the Accumulation Phase or the Preservation and Distribution phase? Greed gets you nowhere if the accumulation phase is finished and you try to keep getting more.
In what ways have the events of 2020 affected your work and your companies?
Thankfully, our business has not taken a hit during the pandemic. We know we are so blessed compared to other companies who have suffered because we have had back to back appointments with our clients who have needed our financial advice and help during this unprecedented time. Right now, one of our most important tasks is ensuring that the proper precautions and safety procedures are in place to protect our clients and our staff.
What are your key tips for achieving success in the finance sector?
Education is key to both yourself and to your clients! There is nothing more disturbing than someone in this sector who baulks on education because it is extremely unfair to the client (and also the agent). Also, do not forget self-improvement and motivation for yourself so you can be the best representative you can be for everyone involved.
In addition to all these amazing companies you’ve founded, you’re also a bestselling author. Please tell us about your books.
I started writing retirement and financial in 2012 when I wrote my first #1 bestseller Retirement You Can’t Outlive. Since then I have written over 15 #1 bestsellers with many becoming #1 international bestsellers in Amazon’s Finance, Retirement, Budgeting, Legacy Planning, Self-Help, Motivation and Nutrition categories. I have also created numerous seminar programs for our agents and clients nationally.
What’s next for you? What are you currently working on and what do you hope to achieve in the future?
I am terrified for our baby boomers with all the bad advice that is given today. We want everyone to be educated to make the right choices, which is the purpose of writing my books. We want to teach so clients know the questions they need to ask their adviser. We want to help as many people retire and protect all they have worked for safely and securely. With proper planning, their wealth will be passed on to future generations wisely. In the next two years, our goal is to open an additional ten offices throughout the US to continue to provide the proper education on financial services.
MasterPlan Retirement Consultants start by asking the right questions and then listening. And not just financial questions, but dreams about what their clients’ retirement should look like, and what concerns keep them awake at night. They then begin “stress testing” their retirement income and assets to see what could cause their retirement journey to get off track. Then they build a plan that targets those weaknesses, building a strategy for every “what if”. We hear more about it below.
Tell us about the foundations of MasterPlan Retirement Consultants.
I decided to found this firm in 2008 during the Great Recession. I was working for another firm, and basically, our story was: “Yes Mrs Smith, you are 73 years old, and you did lose over 35% in your investment account, but hang in there, because the market lost 56%, so we did beat the market.”
With our firm, we invest some, we protect some, and we hedge some, providing opportunities in every type of market and economic situation.
But it doesn’t end with money, income and investing. We truly believe that more money will be lost during retirement through taxes than anywhere else, so we include tax planning strategies as part of our holistic approach. We also include income planning, social security maximisation, estate planning, healthcare planning, pension maximisation, long-term care strategies, premature death planning, special needs situations, and more, bringing all of these disciplines together in a one-stop-shop approach.
We are built on three pillars:
- We are fiduciaries. Our licenses require us to act in the very best interest of our clients, regardless of whether we make money or not.
- We are holistic.
- And we are boutique-style, meaning that we take on a limited number of clients each year to assure that we are able to provide what we have promised to each client.
What should people be cautious of when planning their retirement, considering the current financial environment?
People need to understand that this is no longer their parents’ or grandparents’ retirement. No longer are people retiring with a paid-off house, a healthy pension, a nice social security check, and a savings account that pays 5-7%.
No, the world has changed. Money, like information, moves in nanoseconds. The markets are more volatile than ever. Some new tools and products have been developed over the past 20 years that are powerful in today’s fluid world. We live in a world economy, and other countries and economies can and do affect our financial world.
Social media has also affected retirement planning. Everyone has an opinion or a story of a “friend”, yet most opinions are wrong. Then there is the development of computer-driven financial planning. That may be fine for a 25-year-old, but when it comes to those age 50 and over, someone needs to be able to look them in the eye and understand their real concerns, their real fears. Someone needs to be there when a wife loses her husband and doesn’t have a clue as to what to do next.
That, my friend, is where the rubber meets the road.
What are the benefits of a well-prepared retirement plan?
Peace of mind. How can one enjoy retirement when they don’t have a roadmap to guide them? It’s like being so busy watching your gas gauge, fearful that you don’t have enough gas to make it to your destination, that you miss the scenery, you miss the experience.
We live in a world economy, and other countries and economies can and do affect our financial world.
How has your work been impacted by the current COVID-19 crisis?
Our firm has been busier than ever. People are scared and need somewhere to turn. Our referrals are up and our online classes are well attended. More people are listening to our radio show and responding.
Most healthy people don’t go to the doctor, but once a person develops symptoms, fear and uncertainty creep in and an appointment is made. That is what has been happening with us.
What do you think the next 12-24 months hold for the retirement planning sector?
I see clients moving away from the “big box” advisory and brokerage firms. They are tired of being a number, or getting a new adviser every few years. We know each and every one of our clients personally, we know their families, their joys and their concerns. They also know that we will continue being here. My son, Evan Fricks is also an up and coming adviser with our firm, and we have multiple contingency plans to continue serving our clients, their children and their grandchildren.
Also, I think that the firms that anticipated the deep impact of COVID-19 will thrive, while others will suffer and perhaps die. We were blessed by the fact that we did envision what could happen, and we immediately upgraded all of our technology and the way we conducted business. Before COVID-19, I was doing two online client meetings a year. Now, 97% of all meetings are done via the web. In addition, every class that I taught was in-person – now I have not taught an in-person class since early March. I am teaching approximately 10 classes each month at half the cost via the internet. I see this continuing somewhat after COVID. I enjoy meeting face-to-face with my clients - they are like family to me. But as they age or move away, there will be comfort in knowing that we can still be their financial adviser. I also hope to go back to live, in-person classes because of the connection that can be made with the class but will still do many via the web.
Do you know the difference between pensions and retirement planning? Not many people do or how important it is to start financially planning early on in life. Here Andy Baker explains the basics of retirement planning and the best strategies for young savers.
More information:
Investments for millennials
https://www.eqllp.co.uk/interactive_resources/video-resource-items/investments-for-millenials/
Investments for millenials - Ben Rogers - Equilibrium
Pensions for millennials
https://www.eqllp.co.uk/interactive_resources/video-resource-items/pensions-millennials/
Pension planning for millennials - Paul Farrugia - Equilibrium
Preparing for your children’s future
Preparing for your children's future - Jason Lowe - Equilibrium
Financial professional and Founder of Texas-based Hybrid Financial Rocky Campbell established his company to offer premier retirement services and believes in doing business with integrity. Below, he discusses the financial services that his company offers, as well as his tips for a well-organized retirement plan.
Please tell us a little about the financial services that you help clients with.
While Americans are presented with an ever-changing financial marketplace, making the right financial decisions at the right time can be critical to achieving their financial security and accomplishing financial objectives. Hybrid Financial will guide the process of identifying financial goals, account organization, risk analysis, and problem solving to help their clients accomplish their financial goals safely and simply.
What would you say are the specific challenges of assisting clients with financial solutions?
Not every client is a right fit us and realising that from the start will save both of us time. I’m not the jack of all trades I’m a specialist. Specifically, a specialist in safe money solutions and income producing retirement strategies. I’m real - I don’t tell people what they want to hear. I stick to a single message - safety of principal. I’m a hardworking and straightforward person I believe that if you do the right thing for people, things will work out for you.
What are the most important aspects that need to be ironed out in order to achieve satisfactory result and a well-organized retirement plan for your clients?
We form a strategy that will best fit the client’s needs and will help them feel confident about their financial future.
How do you assist clients with finding out if they are compliant with federal requirements applicable to retirement?
Compliance is important. Our compliance officer will ensure that as the world changes around us, we change with it and notify our clients of any regulations that need to be adhered to.
How can your clients ensure that as much of their estate goes to their family on their death?
We use beneficiary driven products that bypass probate and go directly to the named beneficiary. We believe that all money should go to the family. A living will, or trust can also assist in providing clarity during time of death.
What’s Hybrid Financial’s philosophy?
I don’t do things that I don’t really, really believe in. And something I believe in is the message of the tortes and the hare. Now the hare was fast, but the tortes won the race. Slow and steady wins the race. If we can prevent our clients from going backwards and losing any of their assets to fees and stock market declines, they have more power to win the money game. That’s what I do - I help people slowly and steadily win their financial race, one person at a time.
Based in South West England, with offices in Exeter, Yeovil, Wells and Melksham, Old Mill Accountants and Financial Planners are passionate about helping clients to become more successful. Working proactively as an integrated team, Old Mill helps individuals and businesses to achieve their financial goals, which include growing their businesses, retirement planning and long-term investment strategies.
As part of Finance Monthly’s Ask the Expert feature, earlier this month we caught up with Tony Hawes - a Chartered Financial Planner and Fellow of the Personal Finance Society (PFS) whose main focus is working with and advising owner managed and family businesses as part of Old Mill’s Commercial team.
What are the typical challenges that clients approach you with in relation to the management of their finances?
Clients rightly expect high standards of knowledge and professionalism when it comes to the management of their affairs. They want a trusted adviser who understands their needs and will support them in the long term. Of course, the firm must offer a competitive product range but in my experience, this is of secondary importance to the quality of the adviser/client relationship
What are the challenges presented by the ever changing regulatory environment of the financial planning sector?
Regulatory change is inevitable and ‘part and parcel’ of the financial services world. The real challenge is ‘how can we use these challenges to improve the way we look after our clients?’
Recent GDPR and MIFID 2 regulations highlight the need for increased transparency and we need to examine the way we use personal information about our clients. The introduction of online ‘portals’ allow our clients to access valuable information about their finances at the touch of a button.
Another recent innovation is the introduction of a new document management system which is helping to streamline processes in our journey towards the paperless office.
Having a robust process in place helps ensure that high standards of compliance are achieved and we were particularly pleased to be recognised in this respect in being awarded BS8577 by Standard International for the third consecutive year for the quality of our financial planning practice.
It is however, important not to allow compliance with regulation to drive your business strategy. The healthiest approach is always to focus on building a process which works in the best interest of your client and then overlay this with current regulatory compliance requirements.
What are the most common tax planning solutions that you offer to clients?
It’s important to look at the bigger picture when it comes to tax planning. A good example of this is taking time to consider which business structure is most suitable for the client as incorporated and unincorporated businesses each have different operating requirements, risks and tax treatment.
Common solutions would also include ‘remuneration engineering’ or in other words, how to extract profit in the most tax efficient way using a combination of salary, dividend and pension planning.
Company Directors and key employees can become members of a company sponsored pension scheme such as a SSAS (Small Self-Administered Scheme) which allows them the flexibility to make wide ranging investments such as acquisition of commercial property whilst enjoying valuable tax breaks on contributions and growth.
Of course, there are a number of opportunities available for the individual too such as:
- The ability to reclaim income tax paid and/or defer Capital Gains by investing into EIS/BPR qualifying schemes despite Government proposals to make changes in this area.
- This type of investment remains an important tax planning ‘tool’ for the right client and can be very useful as a part of wider restructuring exercises which could give rise to taxable gains. Of course, advice is important to properly assess the risks involved.
What are the most important aspects that need to be ironed out in order to achieve satisfactory result and a well organised financial plan for your clients?
My methodology is always to ‘start with the end in mind’ and focus on the outcome when it comes to creation of the client’s financial plan and this means establishing clear personal objectives from the outset.
This means asking the right questions: ‘At what age does the client want to achieve financial freedom from the business? And indeed: ‘What does financial freedom mean to the client?’
I also need to understand what resources are currently available in order to help organise these resources and give the client the best chance of success.
Gary Scheer is the Founder and Managing Member of New Jersey-based Gary Scheer LLC, Complete Financial and Retirement Planning. His company’s unique process enables their clients to enjoy a bigger future through a comprehensive, holistic approach. By implementing creative financial and legal strategies, Gary and his team help them protect, preserve and pass on their wealth to have a big impact on their family, friends, and the causes they care most about. This month, Finance Monthy had the opportunity to speak to Gary and learn more about the retirement solutions that his company provides.
How should individuals in the US plan for early retirement? What options are available above and beyond a pension?
Retirement planning in the US is like having a three-legged stool. The first leg is a pension, the second leg is Social Security, and the third leg is one’s personal savings. Unlike during our parents’ working years, today most Americans do not have a pension plan. They may have employer-based programmes, such as 401(k) and 403(b) plans and brokerage accounts that they have used to accumulate money. However, these accounts may be very volatile and offer few, if any options to provide a guaranteed income for life. One of our tasks is to help people create predictable, guaranteed streams of income to supplement their social security and pension pay-outs. We utilise various financial and legal tools to make this happen. In addition, we’ll employ certain creative financial strategies to optimise the non-guaranteed portion of our clients’ portfolios to keep up with inflation and protect them from the potentially devastating costs of unreimbursed medical and long-term care expenses.
What would you say are the most common retirement plans that clients in New York and New Jersey look for?
New York and New Jersey are two of the most expensive states in the US in which to retire.This may become more apparent over time, due to the recent passage of the Tax Cuts and Jobs Act. This will limit the tax deductibility of state and local taxes, commencing 1 January 2018. Most Americans were taught that they should put as much money as they could into Tax Deferred accounts such as IRAs, 401(k) and 403(b) plans. Doing so enabled those to take a tax deduction in the year the investments were made. The money in the accounts was not taxed during the growth years and would only be taxable when the account holder retired and presumably dropped into a lower tax bracket. Many of our clients are shocked to learn that they are in the same or higher tax bracket in retirement than they were during their working years. Between having no more dependent children, little if any tax deductible mortgage interest, and no more tax deductible retirement plan contributions, nearly all of an average retirees’ income is taxable. In addition, investors who contributed to IRAs and employer-based retirement plans during their working years are forced to begin withdrawing from these accounts after turning 70½ through government mandated Required Minimum Distributions (RMDs) whether they need the income or not. Another surprise for many retirees is that their social security income may be taxed. Individuals earning $25,000-$34,000 per year in retirement may be taxed on up to 50% of their social security income. Those with incomes in excess of $34,000 may be taxed on up to 85% of their social security income. For married couples filing joint tax returns, the figures are $32,000-$44,000 and above $44,000 respectively.
What are the most common challenges that people in America face in regards to preparing for a retirement?
There are many risks and challenges that Americans face as they to people living much longer than company actuaries projected. As a result, due to longer life expectancies, those fortunate enough to have a pension are at risk that their former employer, whether a private company or government agency, may not be financially solvent to continue making their promised payments in the future. This may put extra stress on one’s personal savings in order to protect them in the event of potential pension fallout. In addition, since people are living so long, they run the risk of having many years of unreimbursed health to prepare to pay for retirement. One of the biggest and long term care expenses in retirement. This is known as the 'Longevity Risk'. By helping our clients take Longevity Risk ‘off the table’, all of the other risks that retirees must deal with such as stock market risk, interest rate risk, sequence of return risk, liquidity risk and legislative risk will rarely become an issue as people age.
What attracted you to this field? How challenging is it to work in an ever-changing regulatory environment?
In the early stages of my career, I worked primarily with middle management executives and small business owners in connection with their employee benefits, risk management and retirement planning. Then in 2000, a tragic event in my wife’s family changed the focus of my practice to retirement and estate planning. My wife’s grandmother was a frugal but loving woman who worked hard to provide for her three daughters. She owned a knitting store for over 50 years and had built an estate worth nearly half a million dollars. After her death in 2000, the family learned that the estate was nearly bankrupt and all that remained were several small pieces of jewelry which were fought over by the sisters. “How could this happen”, I said to myself; “Where did all the money go?” The answer - in 1994 my wife’s grandmother broke her hip and after a successful hip replacement surgery, went into a rehab/nursing home for 45 days of post operative care. She had one daughter living with her at the time who decided to keep her mother in the nursing home for 6 years at a cost of nearly $400,000! I was shocked and saddened no one had consulted a financial planner to look at alternatives to nursing homes and implement strategies to protect the estate of a woman who worked so hard to build her legacy. This stirred a passion in me to help other families and people near retirement age to protect the wealth they have worked so hard to accumulate. Since then, the financial services profession has become one of the most highly regulated fields in our country. In 2016, the Obama Administration issued new Department of Labor (DOL) Rules mandating that financial professionals offering financial advice involving retirement assets operate as Fiduciaries and "act in their client’s best interests". While one would hope their adviser will recommend products and services that are in a client’s best interests and not merely what is suitable’, when the government gets involved and mandates what private companies should and shouldn’t do, compliance expenses commonly rise dramatically and cause advisers to stop working for smaller clients, the ones who were supposed to benefit from such legislation. Currently, the Trump Administration has put some of the more onerous requirements of the DOL Ruling on hold for further investigation.
How has retirement planning in the US changed in the past 35 years?
In the early 80s, IRAs and 401(k) plans were relatively new. People typically worked for one company for their entire careers, retired with a pension; and along with Social Security, had enough money to enjoy a retirement with few, if any, financial worries. Since then, most private US employers have disbanded their pension plans and offer Defined Contribution Plans such as 401(k)s that require employees to fund a large percentage of their retirement nest eggs. These plan participants have been forced to become their own pension and retirement plan managers with minimal education, training and experience and a limited selection of funding options for what for many is their greatest single financial asset. According to the Society of Actuaries, if a couple is married, there's a 72% chance that one of them will live to age 85 and a 45% chance that one will live to age 90. As a result, having a plan to cover health-related expenses and not run out of money is more critical than ever before.
What is the single most important piece of advice in regards to retirement you would offer to American people?
It is a lot more challenging to plan and implement how to manage one’s assets in the distribution phase of their investment life than during the accumulation stage. This is not a do-it-yourself proposition. Hire a Fiduciary Financial Adviser who specializes in retirement distribution planning to put the odds of success in your favour.
Website: http://garyscheer.com
Geordie Bulmer is the UK winner in the Inheritance Tax Planning Adviser of the Year category in Finance Monthly’s 2018 Taxation Awards. We caught up with him this month to hear about his win and his work within inheritance tax planning.
As winner in the Inheritance Tax Planning Adviser of the Year category, how do you feel your character and attitude towards your profession has made you a leader in the tax planning business?
I’ve been advising on various areas of financial tax planning for over 10 years but have specialised in Inheritance Tax planning because I believe it’s an area where I can add real value. My clients are usually over 60 and one of my strengths is being able to make difficult subjects easier to understand. If a sophisticated investor wants a detailed breakdown of how a specific Trust works, then I can present it at their level but many clients are confused by technical jargon and just want to know that the recommended strategy will achieve their objectives.
You are also a competitive sky diver; how do you believe your skills, not the practical ones of course, transfer to your work in inheritance tax planning?
I stopped skydiving when my wife got pregnant as I could no longer accept the risk of an accident. There is a risk involved with everything and you have to make sure you’ve covered all potential problems before making a big decision, such as establishing a Trust (or jumping out of a plane).
Having joined AISA Professional in 2009, how do you feel the company has developed your winning attributes?
AISA has been winning awards for a number of years now, including International Adviser Excellence in Investment Planning in 2017, so I’m really pleased that we continue to be recognised for our hard work. As a company we aim to follow a planned strategy that we review regularly and this helps us exceed our client’s expectations.
What would you say are two major priorities and concerns of your clients?
Although clients would like their estate to pay less inheritance tax, many do not want to completely give up any future access to their capital or an ongoing income. Therefore every situation has to be individually assessed to ensure current objectives and potential future requirements can be achieved.
Website: http://aisagroup.org/
For an insight into retirement planning in California, this month we reached out to Zachary W. Herzog - Managing Member and Investment Adviser Representative of Wolfgang Capital LLC. In his role, Zachary is in charge of designing and implementing customized financial plans for the company’s clients - tailored to their goals, concerns and what’s important to them now and in the future. Wolfgang Capital’s team looks at all aspects of financial planning including Risk Assessment, Assets Allocation, Income planning, Wealth Maximization, Health Care Planning, Legacy Planning and Tax Strategies to create their comprehensive financial plan. Here Zachary tells us more about it.
What are the typical challenges that clients approach Wolfgang Capital with in relation to the management of their finance?
The majority of our clients want guidance on what to do - they don’t want to make wrong decisions when it comes to certain stages of their retirement. Social security, RMD, long-term care, retirement account management, income planning and tax strategies are most of the concerns that we come across. The biggest worry for our clients is whether they’ll run out of money at some point.
There are two phases in life when It comes to retirement planning - accumulation and income phase. A lot of individuals need help with their income phase of life and that’s what we do. The sequence of events risk isn’t something that’s talked about enough in our industry, so we try to protect our clients from the sequence of events risk when it comes to planning their income in retirement.
What are the most important aspects that need to be ironed out in order to achieve satisfactory result and a well-organized retirement plan for your clients?
We need to make sure to cover their income, asset allocation, risk assessment, asset maximization, health care, legacy and tax strategy planning, which is what our comprehensive financial plan does.
At Wolfgang Capital, we always make sure to understand our clients’ complete situation and goals before moving onto implementing solutions. We incorporate many different strategy assessments to really find out what their common concerns and goals are, so we can implement solutions that really accomplish their desires. Our team spends a lot of time on our clients’ cases at the beginning and on an ongoing basis. It’s important to us that our potential clients are serious about planning their retirement and unfortunately, not everyone is a good fit for our firm. We only work with people that are serious and dedicated to having a sound financial plan in place.
How can your clients ensure that as much of their wealth goes to their family on their death?
Legacy planning is a big part of the overall financial plan, which is why we incorporate 3rd party estate attorneys and CPAs when needed to make sure that the overall financial plan is passing on to their loved ones when clients pass away. We incorporate IRA planning and tax advantaged strategies to help pass the assets on to their family in the correct manner.
Does Wolfgang Capital offer any solutions in respect of maintaining and growing wealth for future generations of the same family?
Yes, we have several different reports that show the power of stretching or generational skipping. We also look into tax advantage solutions to maximize wealth transfer upon someone passing away.
“Our motto is to treat our clients like family.”
Website: http://wolfgangc.com/
Phone: 951-200-5084
Fax: 951-200-5093
Email: info@wolfgangc.com
Fee-based financial planning and investment advisory services are offered by Wolfgang Capital LLC, a Registered Investment Advisor in the State of California. Insurance products and services are offered through Wolfgang Financial and Insurance Agency LLC. Wolfgang Capital LLC and Wolfgang Financial and Insurance Agency LLC are affiliated companies. Neither Wolfgang Financial and Insurance Agency LLC or Wolfgang Capital LLC provide legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Wolfgang Capital LLC,Wolfgang Financial and Insurance Agency LLC and Zachary Herzog are not affiliated with or endorsed by the Social Security Administration.This content is for informational purposes only and should not be used to make any financial decisions.
Phil McGovern is the Managing Director of MPA Financial Management Ltd., a financial services company based in Warwickshire, United Kingdom. The firm started in 1998 but since 2010 the company has grown rapidly - from managing £40M to currently managing £380M on behalf of clients. Here Phil tells Finance Monthly’s readers more about the services that his company provides and offers his tips on
retirement planning.
Can you tell us more about MPA Financial Management and the services that it offers?
We believe in employing people who have high emotional intelligence and can relate to normal people. We spend a lot of time and money training our staff to high levels of educational achievement through the CII and we have a strapline of Inform, educate, inspire. We want to inform, educate and inspire our clients and staff to meet their long-term goals of financial and personal satisfaction.
We mainly manage money on behalf of clients in various tax wrappers and 70% of our business is pension-related. We also offer the full range of mortgages, life and health protection but over the years pensions and investments have grown substantially.
We offer 3 main services on the wealth management side:
-MPA Private Client for clients with investable assets in excess of £500,000 pa. They are offered quarterly reviews, access to discretionary fund managers or model portfolios or bespoke offerings. We also arrange special lunches with fund managers and industry speakers and access to other professional services.
-MPA Wealth offers pension and investment services from £75,000 to £500,000. We usually recommend a Model Portfolio service from our panel of MPS (5 companies) which are risk rated against Distribution Technology. Clients will get annual or biannual reviews (depending on size).
-MPA Lite is a cost effective solution for small portfolios which uses 7IMs passive risk rated portfolios, under £75,000 in size.
We also run a post retirement investment solution that combines Prudentials PruFund Growth (40%) with Brewin Dolphin Balanced, reducing volatility down by 2/3 and performance by 1/3 (as against using Brewins only).
We offer whole of market mortgage service and a will writing and probate service. We are increasingly involved in long-term care planning.
We are pension transfer specialists and have advised many clients on the merits of transferring out (or not) of defined benefit schemes.
Can you outline the process you go through to assess your clients’ current financial situation and assist them with identifying financial goals and concerns?
We complete a comprehensive factfind in the early stages trying to ascertain, in the clients’ own words what they are trying to achieve with their finances.
We spend a lot of time trying to work out the clients’ attitude to investment risk and their capacity for financial loss using our own in-house questionnaire.
We then recommend investment solutions that will match their risk and long-term plan and recommend the tax wrappers that are the most tax efficient way of investing the money.
We then ensure that we monitor the performance of the investments, and the tax consequences on an ongoing basis so that they meet their goals. We spend a lot of time communicating with them to keep them happy about their investments and helping them understand how they react as they do
How should individuals plan for early retirement? What options are available above and beyond a pension?
Ideally, they should start early. Many clients come to us just before or at retirement and want us to manage the money for them when the wealth has been built up.
There are many ways to structure a retirement plan. We tend to use ISAs, OEICs, investment bonds, EIS and VCTs to get a balance between risk, reward, income, growth and tax efficiency. We will also use investment property as another asset that can generate income and capital growth.
Advising on DB transfers has become a large part of the advice process in the last 2 years while transfer values are so high and that has to be factored in to the advice process.
In your experience, are individuals fully aware of their assets and worth so that they can take advantage of tax planning? Which types of assets are usually missed?
No, in my experience they do not understand the difference between all the tax wrappers we use. They generally have an idea of worth but we take a lot of time explaining the strategies that we use to maximise returns and minimise tax.
Maximising pension contributions using carry forward is complicated and they don’t understand that. Also, the planning for high-earners’ pensions and the Lifetime Allowance is something they don’t understand.
We maximise ISAs and invest other monies in a general investment account and use this to fund ISAs each tax year. This works up to £250,000 but over this CGT becomes an issue. Therefore, we then use investment bonds as a very tax efficient income generator.
We use AIM portfolios for IHT planning alongside trust work.
What solutions do you offer in respect of maintaining and growing wealth for future generations of the same family?
We can aggregate asset value for family members so that they can benefits from large fund discounts. Discounts start over £500,000 and children with an ISA for £20,000 could get the investment with no initial charge and a reduced ongoing charge with Family Discount.
We have joint meetings with children so that if anything happens we have met them.
Also, trust-based work and long-term care leads to dealing with the children and beneficiaries.
As a Managing Director of MPA Financial Management, what are your key responsibilities? What does a typical day look like for you?
My key responsibilities include managing the day-to-day business, the finances, recruitment, marketing, strategic planning, discipline, investment management and also looking after a large client book.
I sign off all the DB transfers for the company and get involved with compliance and process for DBs.
A typical day would be as follows:
-Wake up at 4am, check the company bank accounts to see what money has come in today;
-Leave for office at 7.30;
-Catch up on emails and paperwork. Probably review sign offs for DB transfers sitting on my desk (usually at least 6);
-Write financial planning report for a client;
-Go on various platforms to check on performance of various portfolios;
-Maybe have a review meeting with a client. Administrator will prepare paperwork, so will check for accuracy. Check Intelliflo back office system for notes of previous meeting. Look at Analytics for research on portfolio;
-Meeting with client lasts usually 1 hour. Pass on notes to admin and any work to do;
-Have meeting with Admin manager for updates on how things are going. Deal with any issues;
-Talk with Office Manager for any logistical issues need to know about;
-Constantly replying to emails from clients or reps;
-May meet with rep from investment company;
-If any spare time, I tend do some investment research or talk to clients;
-Get home at around 6pm and carry on responding to emails I have missed.
What is your vision for the future of the services that MPA Financial Management offers?
I want us to be a firm that is respected countrywide for the levels of service it gives to clients and the level of ethics it employs in dealing with everyone. I want us to help more and more people reach their financial goals without having sleepless nights.
Our long-term target is to reach £1BN in funds under management and to keep striving to drive down investment costs for clients.
Website: http://www.mpafm.co.uk/
